FITB - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, my name is Kyle and I will be your conference operator today. At this time, I would like to welcome everyone to the Fifth Third Bancorp’s 3Q18 earnings call. All lines will be placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

If you would like to ask a question, simply press star then the number one on your telephone keypad. press key. question, your withdraw the pound To Thank you. Mr. you Gokhale, conference. your of Relations, Head Investor may begin Sameer

Sameer Gokhale

date Thank Good in our release measures us. cautionary find earnings today’s review reference concerning merger with Anderson; the related which presentations regarding contained Third financial additional Forrest, Today along to not Leonard. Tayfun forward-looking This the you can merger Fifth for conference quarter and use and the we all release Kyle. are third in call where in of in review our on and non-GAAP materials. surrounding regarding and other Officer will we Risk language important of undertakes morning this the our expect release statements Please update other information earnings to forward-looking and commentary this would included Third be no cautionary Fifth and during related call of Reconciliations and Officer our our and the be our Jamie of Part XXXX. it. found measures. presentation President such joined I’m Operating Lars Chief discussing Greg by to Carmichael; morning, Tuzun; of CEO, financial and non-GAAP CFO statement any after for Treasurer Chief you Frank financial information also presentation, results includes Please Inc. our thank of call. obligation materials, Bancorp. MB joining discussion Financial proposed earnings our the

questions. the Greg call Following will for we by open prepared remarks and Tayfun, up

call comments. the over to now Let his Greg me for turn

Greg Carmichael

$X.XX income reported XXXX $X.XX you us morning. per on EPS. Thanks items share. this Sameer, these reported are of a in million shareholders two Earlier impact which net today, common joining third results we negative for to earnings $XXX had of of thank Included and of and quarter available all

third the share earnings $X.XX core were items, quarter. these per in Excluding

Our focus and were growth, strong and realize are am quarter our balance Project financial sheet, our to results implemented maintaining discipline. we reflected of we profitable I generating continuing Star. our North benefits that the on expense for several initiatives the under strengthening pleased

our I’d make consumer factors level highlights and lower positive observations The priorities at the and economic consumer strong uncertainty revisit like the I have remains Consumers from wage to created key rate income In to clients benefits macroeconomic the commercial XX quarter, among the about continue imposition labor and helped commercial years a are with the a our for has Before business, rhetoric almost in growth. is tariffs of backdrop market few sentiment; fact, generally strong. with increased the These lowest consumer unemployment benefiting in strategic healthy China drive confidence taxes escalating and our our spending customers. deregulation, see but lower Americans highest and for since of XXXX. environment. core

help this that the some geopolitical agreement new Mexico uncertainty. are alleviate will optimistic Canada and We of with trade

levels. debt economic in a have outside issues to difficulties we effect sector experience leverage These Higher are the may spillover interest continues raise may negatively that Fed corporate addition could the closely the developments banking trade, monitoring traditional to In impact rates. international borrowers as growth.

While prudent is of overall remain believe supportive to the backdrop it economic we growth, future remains cautious.

our maintain profitability. and disciplined on focus We will credit continue quality to

as Executing expense we communicated. Fifth key financial will our focused are priorities, previously are to well as and enable on us on revenue have achieve priorities. at strategic achieve to we efficiencies. enhance strategic Third to initiatives these growth as They our Moving designed on three objectives

completing that implementation the the we late program. the announced North XXXX achieve along initiatives. Star in North focused on our targets with after Star are remaining completing we financial First, of expect We to

There this said As overall this realized we few year We indicate strong achieve projects year-end vast previously, results this track remaining with our end XXXX. to that of the that completed but a Star. fully of by of majority the be Project our have pleased are are will by North areas to we the progress. completed are objectives again results with very believe year be on quarter we under our work

the is MB next to Our party successfully complete Financial transaction.

common confident to MB implementation pleased the revenue synergies in the to Star in us expected proceeds realize voted have communicated. integration recently on We expense the We we that work our were North the focus approve behind which ensuring that the smoothly. of can ability XXXX, shareholders MB we and With remain previously transaction.

be We continue first close the of to to able in to quarter expect XXXX.

with re-submitted Additionally, the regulators acquisition. forma plan pro CCAR recently the of our our to impact we

expect April conditions. regulatory We with customary approvals by year. other feedback the receive distribution to and end completion is In plan consistent XXXX. submitted the closing in of the our capital remain originally transaction activities of the meantime, to MB subject of the should The

his everything in progressing mention as will Tayfun expected. remarks, As is

is party opportunities profitable key to businesses. in third Our our organic pursue growth

and prioritizing In household across our addition growth drive revenue to organic network deposit initiative to retail opportunities footprint, areas of all across our franchise. growth we optimization the improved branch are also

with portfolio. For instance, our enhanced successfully continue to strong capabilities assess growth the to local grow high where market markets knowledge we in can product we opportunities talent combine and

in the wealth are and sales management, force to business. management, markets and we capital treasury asset continuing Additionally, our to add

for quarter third Tayfun aspects review Moving results key on then the quarter, would and to greater some detail. the the to discuss of the like will in I key highlights

First, strengthen balance to we continue sheet. our

balance through return Star credit was As you appropriately cycle. to the our key of may recall, outperform Project one and in order in objectives risk North to

have progress we pleased are We with made. the very

improve assets level lowest forward the loans crisis. in continue the were credit nearly non-performing years the Our before as key looking XX since and level at at lowest criticized to metrics are

We more focused of enhancing have originating loans balance sheet. also again resiliency our selectively, on

our peers cycles We credit return will to growth have deposit over we continue C&I relationship time. more X%, to quarter. by Despite our deposits shareholders by during solid expand. the and loan Also, by we growth. quarter we loans yield to allow grew underwriting X%, strong household profile continued generate capital and believe While strong maintained have and margin through to us successfully interest to our standards, net last market profitable X%. the we Compared of households conditions, challenging third year, and generated loan, outperform

Furthermore, Additionally, of our positive terms and has inflows group successfully and track quarter to we expenses. on management year, both total generated continue wealth year asset for diligently record this manage in a our AUM revenue. every

we prior positive operating reiterate growth XXXX expense declined expenses to leverage. the to quarter Our with expectations from of continue for drive down our core X% I in as want X% X%. headcount only

of profitable X% Our year. our growing increase and managing our compared the led relationships forward has focus diligently expenses third on quarter to to in last a PPNR

Our headquarters efficiency track achieve core common return first enhanced a income the and the remarkably low to at customer is Police on and to like XX%. the our XX%, in to for I With many ratio results also like the our to excluding core witness after results. and current expense has would deal of of been a to Cincinnati and to employees, tangible financial show our remain on month which evident Star once quarter In during targets. humbling center, on would in our the and It event Department, for employees generated X.XX%, thank financial over early at we thank assets housing how past our North equity tragic has a impact outlook. with and our the core come of return third quarter, the tragedy. company we always their turn their I’ll others responders third our discuss again our I a together it over September. dedication results work this keeping of and half efforts for hard Tayfun that, to

Tayfun Tuzun

Thanks Greg. us. thank and morning, joining for you Good

X Let’s of highlights presentation. the the move financial to Slide on

Page $X our pre-tax on Green were including reflecting of total results X were sheet, noted were related and and As Greg Visa the our overall, on were a there Sky relationship million the was the focused release, Reported $XX mark-to-market profitable constructive negatively results discipline. by environment Market to although our our more where strengthened return swap We third pre-tax stake. million mentioned, equity an balance maintained impacted certain dynamics on pockets charge challenging. the charge growth, strong. expense quarter items

and Excluding growth expenses these our efficiency Strong compared items, pre-provision to starting the net lower to year-over-year. well revenue increased revenue contained sequentially the and and year-ago X% improved which X% substantially quarter. prior are ratio,

its reached Excluding low our since XXXX. ratio core lowest XX% efficiency expense, level income of housing

to continued be performance credit solid. Our

priorities are for top While we are reported as growth. Greg strongest reiterated guiding to added using that loan metrics long plan principles our result three years, a strong loan XX expectations. for we baseline in of comments, In our our forward-looking These opening reserves as success. credit priorities term loss his a XXXX we nearly the the

while expense tight Our goal is control. to carry the momentum forward maintaining revenue

We manage remaining will our sheet business. factors by impacting to continue of mindful the risk balance environment

to cycle. expect rate which credit from the start rates, continue benefit We us room maturing interest gives rising to managing for to

as that us our eventual profile expect cycle. to believe also positions turn performance strong good the credit but We continues economy the credit in well expand the for

rewarding prudently our capital the goal of and ultimate future. the our manage with shareholders to continue today we Lastly, in

fruition. North mostly as Slide benefits months, the past also behind and reduced have of the combined coming over been X, commercial exits are Moving Star The we to is to originations the of impact indicating few auto us.

result, achieve forward higher course of expect factors. quarterly to going amount of compared on depending growth we overall environmental a of years. the growth As vary The to couple past loan will

prior compared This basis. previous up was same in quarter, total loan loans. of We year-over-year reflecting on was average were X% growth the loans compared growth the quarter, total with X.X% and loans portfolio period our commercial to growth prior in rate to a guidance. consistent achieved C&I End mostly quarter the

increased our initiatives. of in compared last in quarter. middle both and generating estate Star success reflects profitable Our results commercial real of market to North period growth the corporate X% balances emerging lending End

balances capital. a remain balances the percentage balances sequentially, of total were CRE and well the below year our lowest next as in below was was ago This less strong approximately to XX%. are significantly peer of as CRE lowest to our capital likely Although believe the group peer. percentage a risk-based We than X% increased quarter. peers’ growth CRE our compared

albeit runoff, in credit book unsecured loans. in than line end more of Similar a industry both to basis sequential ago be the estate in and pace. runoff third first seasonal continue to currently commercial were of The to trends fourth in the equity loans period decline to at balances with rates home portfolio quarter. reflect modestly in balances we as this to mostly and anticipated total in portfolio and consumer up expect to industry relatively compared in quarter, with consumer We point were a historical our two loans and Average lending our maintain the reflecting earlier to loans is fourth noting equity were to quarters, will initiatives. loans our at X% previous our line legacy continue above in runoff will the year third continues total the decline point with is In a approach Growth quarter. mortgage the an period end consistent quarter. have on that our this auto flat continued sequentially at growth modest expect the originations essentially This we to quarter, guidance. commercial and End loan compared is worth home to Star as these in trends. are in outpace portfolio the other reflect started prior We a card inflection grow are It the flat of consumer indirect grow we consumer to cycle. North real period the are compared happening cautious flat quarter. our This rates, portfolios quarter. loan somewhat in

the Our credit the growth quarter. up stable on portfolio rates a similar card compared were should core to third auto prior year-over-year be to X% Total deposits and quarter. and basis

growth. above generating growth loan To that, deposits. Our help average is incremental household with continue achieve will to focus to we peer fund on goal core

We deposits corporate initiatives. support engagements, management treasury again of plan to a the also of North reflecting grow number with Star commercial

to the Moving prior basis or income Slide The on $XX of XXXX. X, ago Compared increased NIM $XX million NII XX net year was and third X% from the quarter. quarter NIM to to increased interest The or from expanded be the factor X% guidance. most increased the points the quarter, two of up core both interest continues quarter. impactful NIM our points, points on X basis which The previous basis bearing deposit exceeded on our increase during XX quarter, point in average the well rates betas. basis second the deposits million below

September with consumer approximately Fed commercial beta beta and of resulting we hike XX% beta in was expect the the rate XX% XX%, commercial The overall in hike of beta low Our XXs. the XXXX and XXs result June to consumer low the resulted a in to of increase approximately cumulative leading in a and combined rate of September XX%, approximately an about XX%. in beta up

expect additional future betas with We increases deposit hikes. incremental in rate

increase X% points quarter up We September the expect growth three our of from and This X% the rate sheet year December to December growth function the and NII approximately basis quarter, for is a Fed benefit be NIM the Accordingly, to sequentially, NII which largely to balance which to full expected hikes. XXXX. translates the two funds expect increase. rate quarter fourth third we assumes from fourth a

items, excluding income the strength and in banking, both asset in corporate overall trends income ago deposit prior processing and The on to X, quarter. Slide the impact X% increased fee consumer management in of revenues. year and wealth payments compared Moving and non-core non-interest increases the steady to and reflect

mortgage We which in reflective performance impacting very is mortgage outlier trends year. the industry trends. of fee clearly clearly year The is total growth banking, expect to income much quarterly over fluctuations. The with our some these continue fee is weakness is

is about basis, income year-to-date up are a on Our core fees mortgage fee core but X% approximately excluding X%. up

portfolio billion since be origination on-boarded servicing at of the portfolio on billion our points. servicing the gain volume year. and acquired $X quarter, added was basis margin the billion remained beginning fourth to bringing to to $X.X quarter, in low We sale $XX approximately total XXX last This the

that year strong. Our we corporate banking fees finish remain will solid the optimistic and are we

and market Our treasury help the quarter fourth growth us consumer to management, increased both compared able we impact offset Sequential in and should rates. volume, single by encouraging in In have us ago which fees this higher to reflected strong the due service to higher charges million helped credit deposit year, higher to X% mid conditions. debit increased has year prior fees Card to quarter, between banking year been subject processing neutralize household earnings credit of at tied grow $XXX quarter and rate is Deposit corporate top rewards. million the performance partially revenue our Growth pipeline and generate the strong X% line to a the and digit transaction increased compared fees been quarter. rewards. ago our numbers. $XXX

to income The For X% non-interest the fourth quarter, from quarter we this our expect non-interest reported third $XXX million. than approximately better guidance. was in X% prior increase expenses quarter of income decline adjusted non-interest

expense the priority but we marketing, overall we we to such finding last As are impact on as areas elsewhere invest quarter, in high IT and to limit discussed growth. efficiencies continue

Our which third adjusted excluding the expense, XX.X% tax was XX.X% line. efficiency ratio amortization for housing or low all quarter reflect in their income peers the

quarter the only surcharge premium expenses, over foreseeable year the and and third quarter a X% effect, quarter are on Fourth achieved MB is the excluding FDIC both expenses If lowered, and expected to over about the related positive improve acquisition to our future. up continue basis, expenses remain remains to FDIC expect this in from quarter in leverage should third flat quarter. We from quarter. have any the operating year assuming be

review you today, to X% XXXX to our in the prepared over details plan Although expenses approximately not we expect be we year core shared as XXXX. up with are in our year we of September,

three impact The that a credit since were over to Slide results crisis. near XX, quarter decreasing credit down down basis the leases sequentially. a third and XX of improved the the non-accrual points year charge-offs of ratio lowest basis year. of XX low, million, charge-off Total The loans to $XXX X X% net last was XX-year before lease ago basis in and provision from in XX million the ratio X.XX% commercial remained or at $XX and and last quarter million quarter. improve, $XX our year the assets we Turning for with reflecting follow executed from years. positive the actions expectations continued the criticized basis XX% X.X% previous last consumer basis from trend X.XX%, the to X.XX%. points $XX The and in Net quarter. XX losses The results quarter the current The ratio loan continued compared portfolio points million line prior points were down $XX on last quarter charge-off in coverage rate and from to points, prior totaled million quarter. to

continues quarter, you fluctuations, the credit stable backdrop current of quarterly support levels potential to remind we given every with low charge-offs. relatively economic absolute current outlook As a

Turning very the strong remained to quarter. Slide XX, capital during levels

Our common excluding ratio gains unrealized equity X X.XX%. XX.X% tangible and and common ratio losses was equity our Tier was

the During we settled share and in initiated quarter, million $XXX repurchases.

CCAR As our Greg the results impact of Fifth Financial combined re-submitted XXXX forma mentioned, revised Company. and we recently for MB Third the pro

XX same capital management near remain At the compared were end CCAR common quarter of we third line X% as XXXX the term our capital this the and million or shares and or down last XXXX, year’s with quarter. second before to term resume in X% quarter, compared shares and Our third XX the our long plan. almost of down targets shares million will to quarter actions outstanding

in Moving XX.XX% fourth the of tax XX, quarter to range we to expect XX.XX%. Slide be to our for the rate

to to we in long Excluding rate expect be the would the term our items XXXX, XX.XX% XX.XX% that are specific tax to range.

approvals regulatory and conditions. MB on We in on integration. been subject applications with of first Now MB regulatory transaction an remain track have other filed. the the close the to to All XX Financial to Slide XXXX update quarter closing

announcement. client by talent the highly successful We and the continue retention results be since encouraged to

and We generate expense priorities. remain In ability reiterate for our strategic on synergies remain and few also focused revenue previously. we strong points. to I third the quarter would summary, very reported financial like to results have in discussed confident the a three our We

are apparent financial throughout initiatives XXXX. work We the the nearing these Star results North of of and expect more completion Project to become the

also benefits generating We financial seamlessly integrating remain the successfully MB focused previously. the as discussed on acquisition and

to financial are opportunities. households, company end, revenue branch organic To our enhance optimizing to improve network returns to we and deposits through growth. position our we that Lastly, continue the growth

we can where enhance capital other including where also believe sales to lending growth, to these revenue higher achieve our return we force middle continue We market we to metrics add resources businesses in and expect markets. our and

focused strategic our executing are ability We our to to on it targets. against successfully achieve Sameer our me enhanced in call up that, With turn and to open the priorities confident Q&A. over for let remain financial

Sameer Gokhale

Tayfun. Thanks

Before we to we start limit queue Q&A, one question a questions. to if as the you that have then a and ask others, follow-up, and return courtesy to yourself you additional

in our morning. time We to will questions the as possible have best do as we many answer this

the for During that your Kyle, answer firm please questions. question name up of to and provide please and the operator. open period, call your the

Operator

from from Your first of comes line the Winter question instructions] Wedbush. [Operator Peter

line is Your open.

Peter Winter

morning. Good

Tayfun Tuzun

Good morning, Peter.

Peter Winter

on to and expense keep that? surcharge low assume goes wanted it for drivers and that you expenses Can away, how just what much the the up is year. next that some guidance FDIC to follow I of are about talk does

Tayfun Tuzun

to our normalized surcharge and basically million beginning for that continue information our a will efficiency our X%, we will in and retail with executed It goes in growth have to year, related the clearly is will our maintain second in really a million We in area change year. X.X employees estate well savings. the does we assume and this commercial somewhere merit assume portions, increase have both procurement increased few we investments as $XX force, from in maintain groups. around no and that in that continue actions management savings as XXXX, real that benefit the sales also will expense base we a quarter about the it’s business technology our $XX away we to but FDIC There

able We confident will are achieve in to be that we pretty XXXX. that

Peter Winter

guidance and follow-up, a banking you a fourth got nice then pushed just into bit the this gave you coming are than Were that of quarter. that for there lower quarter out that just delayed in XQ looking quarter? and increase earnings, a some the Then fourth corporate little deals was

Lars Anderson

Peter, Lars. this is

capital you’ve I activity markets think regional in debt was the consistent what with seen muted. obviously banks,

signs you from over we debt one loan look tell you solid a terms look expected it capabilities, nice lot expecting, at loan you as expanded say growth, I at was market clearly subject for good, quarter, We a capital know, than wasn’t have investments we did positioned. the have M&A of and a of the we was quarter fourth know, up are would our period and in It industry and of our us the that our end on clearly as driver, pipeline aligned third that quarter had that which fourth we in there in be some see would pay-downs. those key quarter our--you of C&I would conditions. in quarter. lower lower really with to markets. of verticals well made that early outstandings, expect clearly, if I a our basis and benefited would we We’ve investment X%, benefit banking, the but It

Peter Winter

you. Thank

Operator

of line Elliott next Geoffrey from the comes Autonomous Research. from Your question

open. is line Your

Geoffrey Elliott

Thanks for Hello, the morning. taking good question.

is slides consistent some into the resumption reviewing First, the a sort re-submission? submitted originally Fed referring distribution there the while little after expecting plan. in just The resume to of talk CCAR the about just a capital quarter, that activities to the or period pause with Is going clarification. buyback blackout is

Tayfun Tuzun

There is Geoffrey. pause, no

We the this It to disclosed activity opens release will previously ability the quarterly earnings. XXXX with the of execute up results. our just resume

Geoffrey Elliott

understood. it, Got

low quarter, $X.X has the you said billion. back like the seems - and you feels of the low saves? bit you of talk guide said since what bouncing the call over $X.X billion been to of been On taking at around that, outlook out coming then quarter second you’ve potential to make the low a what’s and the little bit changed and there, $X.X course the the then to you to to end dropped through $X.X points Can of end, specifically end of the this optimistic to changing expense more the expense on had you year then and the range a kind side, some in billion it squeeze what’s kind it that billion

Tayfun Tuzun

Clearly expenses good a continue to be very us. story for

only in terms million, in the third The quarter a fourth mean, did better of expectations have July, relative assumption. QX quarter, we go we took change in second quarter obviously we say, of for I activities July, - at discussed million really third full of just relative But Back some assumed of number has so flat but is discussed to actually another, to number expectations. so IT. continued the surcharge where would came in In year our you, we that outlook that we let’s $XX In ended growth the our little quarter July, we FDIC look into up than X% bit adds our our changed. the we of on into that. because the expected expected how it the $XX with QX, spend that surcharge up marketing expense in this quarter expectations. that below our away would fourth year, None

guidance. investments necessarily our up, without from are that with continues results total into good We expenses able in taking afford but we X% those investments, efficiencies be elsewhere our finding are organization story XXXX more marketing seeing to and to our

Geoffrey Elliott

and told a technology more coming are detail bit going Can more investing biggest on efficiencies? guess bit could the increases, still you force on you in where you’re be the us merit sales you’ve and a where the saves from? give to I elaborate but

Tayfun Tuzun

we over a second for that year so this year benefited that basis the that’s on some little and quarter basis, because year million, less full middle bit about On quarter, $XX than a a a we’ve $XX our took year action base about office and office in million. it’s quarter streamlining the back direction, comp think alters half. I of functions a

estate vendor good We seeing third our of actions us. management. be are efficiency from clearly on to party continued Real source for coming a continues saving focus

so number We of think party we basis lowered our spend, of out good to achieve when a target XX% end to consulting revenue is a of the actions ratio standalone have including tight I slowly return on our targets. we they by expense efficiency growth, spending, management set below third now these knew achieve online. enabling and were that are us XXXX, that With also coming to online, going the come

Geoffrey Elliott

much. very Thanks

Operator

comes Bank Your Erika next of question from Najarian the America. from of line

line Your open. is

Erika Najarian

could of and/or rate. a growth competition that’s wondering and of terms morning. wanted if sense from impacting bit good give structure about your this been the Thank seat, quarter, you. how little you I’m for prospects commercial if dynamics more non-banks you in to for guys lot and Hi, ask a just I the There’s competitive us like about lending. what the conversation is a of looking

Frank Forrest

Frank. This is

banks, about the a been a company than by see a sit, I’ll a risks them highest calls, on on in the and their this over evaluate. other influence do we’re we seeing exposure them Where the we and benefit they reduce our part last higher talk From the Let and and banks. well. we have to middle recipients we that from of we estate our to From million firms of in where That’s forward have in real have then about we’ll leveraged talked see level me companies years, outlook middle and the competitive increasing see today. market a perspective tend in appetite has we from over reduced point. relationships flip loan risk ownership PE have vantage it as expect before, credit there traditional and have--they lot and exposure from to see it portfolio and in earnings to structure start lending of three appetite where heard market. we it it perspective in had we from perspective different lot do. seen have $X Lars large markets, I actually in see credits for now of leveraged as a side. the so a able non-bank we we of we The pricing We more by didn’t have the that strategically lot our the a broader to them these go of sit, interest came I those from market in some you’ve markets, because were of a leveraged outside something being a we’ve an see that them, syndicated clearly take-outs, we’ve

participants a syndicated today an than economy have we if perspective we you been up seeing interesting of result have. a that we’ve people different We a more with of as banks, what have end Anyway, appetite risk that slips that’s that for are that, get from and and that where credit are influenced. bit loan could non-bank a

Lars Anderson

it you middle Frank in just tell a would think I Erika, Yes quarters, hit part very seeing quickly I That’s Star markets, nicely. two now North investments. we’re was our of continued the success, environment. core which

and say versus of debt. ability approach empathetic, there market, our for out market the is institutional type there a looking part capabilities, lending more relationship-based deliver, the flexible, Our to that to I’d a that’s

with those strategy. harvesting opportunities our We’re that’s - consistent

end even lower that of thing We’re corporate doing banking. same the into corporate banking,

really that’s with some expertise coming unique. We’re in

stretched, will is clearly discipline, but our returns, I stay So that returns, and tell on the environment. but going pricing opportunities, there relationship getting very shifting is to on a focused our there in structure credit we’re is pricing macroeconomic you pricing but

Erika Najarian

it. Got

for exposure transactions. risk. question As terms reminding you and term follow-up you lending much in of share us stands leveraged I’m that, your for facilities how exposure wondering us Frank, what to thank could with if sponsor-backed you have residual reduced today current my

Frank Forrest

we have our the taken we’ve commercial XX% operate XX exposure appetite that the within significant of fact that’s tell over do can book. overall book. Erika, over because today months. risk exposure within that Again, limits I we a in board-approved that you of reduction not a past

We’re and treat that don’t involved we very well that still credit it a has team and focuses operated the of on have support specialized an existing well. business, primarily years outstanding line performed a treat product in as Third, an environment separate leveraged actively and there Fifth business, so leverage it’s for at as We leverage that. Lars know a clients to of number we in

believe Our we standards, are credit prudent. underwriting

concentrated We’re that so book, structure we and about virtually risk leveraged those our leveraged also of being prudent if of it’s I’ll recently comments. any underwrite highly we add additional a changing Lars clients think there’s continue that though cov-lite books been good again covenants, in not fashion, feel I’ll see higher even only no to with XX% about. structures, articles very standards. in I has a lot

Lars Anderson

hit you approach very our strategy it and of a very - think market Frank No, small that overall disciplined book. well, to I part and

Erika Najarian

Clear, thank you much. very

Operator

Your next Mayo of question comes from Fargo Mike from the Securities. Wells line

Your open. line is

Mike Mayo

a more give year, a the last the new be will but do you expectations, what targets little address of growth this a think specifically areas. qualitatively, day Does your and on or what you bit Financial? close better color and if MB little day bit other and some challenge, of and looks expense see where loan your a of page, growth could first the Can Versus it Hi. original that little the expected on you you we year? just than can more

Greg Carmichael

over us throw and integration Greg. start it to that this for Jamie, Mike, we leading then discussed I’ll before. effort is that who’s I’ll

and now that next of our original work that’s First we first to off, this receive plan as transaction our had integrated approval been we’ll quarter now quickly intent close not as year that has is year. transaction, the the right possible, right close Once to hopefully get but and changed. regulatory

all and just applications, closing we’ll move then that of waiting forward first appropriate alluded to and so response forth filed filings As we’re get the to, year. so and with that regulatory Tayfun back we’ve

to We the feel target team, done our the year. we we that close more we really comfortable that first there. accomplish our since we commitment ability on put deliver were efforts that on expense so expectations With With diligence then transaction out all will focus million, respect of due $XXX not this even Mike, there. that and in we the task, made we’re confident, has when that that very than of been achieving the can to

It’s we’re that talented in a revenue million. out those really we objectives after to where MB we very there our on have achieve add? We the and we together partnership we there’s opportunities the $XX very on want to bringing comfortable as and Financial. a complete years group, you We million those feel can with that, comfortable opportunities addition side. to over do based see Jamie, transaction. anything think you very number In we of feel $XX the put business what

Jamie Leonard

Mike. question, say thanks for the I’d Yes,

the white definitely very targets; the really hit that to As and Greg ensuring question MB, one in the post-integration. quality that get we back the operate, mentioned, most of modeling impressive things, touch, focused on just that our we’re the people very that our been confident we’re high did of or to your maybe their on continues but they that glove it’s surprising treatment the business customers at ability

Mike Mayo

for year, does As expense the how firm that X%, Financial? up the far reflect target next as MB growth

Jamie Leonard

Mike. expense Obviously we’re on pretty regarding our MB. a basis, expectations That’s standalone public about

Mike Mayo

and increased fine, Then on non-banks you more that of a competition the MB do impact you bit growth little environment? impact you or how higher the the that? interest last do in Do that from this at the challenge specifically, a of follow-up, the could think rates, be feel loan about Financial feel with

Jamie Leonard

have returns, high outstanding space bring Mike, that clients middle to and are attractive over the have also area. us, very, with of returns. that very lending positive. to their so market thing I client strategy. again good to market equipment They that our they in that’s middle a piece us. satisfaction increased We expertise the is this in attractive really They lending deeper scores, complements finance we us point One, past it significantly year years. client ability standalone important out lot hit really at a our XX get build are of synergies Same look last - relationships, point. as lead so that asset-based lower number things important three really a couple of Having as on our revenue lower only I’d tables that national join have with they capabilities MB asset-based company. get

do to I just there’s and fronts, We’re think, and us going those what three of for is returns more, lots say excited there I’d drive to, key us. opportunities relationships. attractive on that’s about for

Greg Carmichael

- would and about we couldn’t is be Mike, I pleased is the talked talent the the that we more only quality other of Greg once this add the thing - the and and interactions with again a people, Feiger, CEO the and retaining the talent we place that Mitch that we’ve job, nice business. of also in retaining the base. credit done We’ve had have with that customer I team, really and

is come seen, any seen continue real material haven’t we talent as we but integration. to against, we in move o thought we which We base towards seeing that execute to change the what we’re customer fruition would have

Mike Mayo

right, thank you. All

Operator

comes Your question the Saul from of from next line Martinez UBS.

is open. Your line

Saul Martinez

on guys in is but their just that’s of raised some about banks broadly, the how credit. to this sizeable I just have anything yourselves of the up see follow corporate that can loan book, time? specific to I concerns NCOs risk you not more their dynamic profile good specifically, did have provisions there leverage Financial. talk you But seen from idiosyncratic is how of margin changed you you it’s have some wanted to Hey, results morning. one related smaller this uptick happens or the credit to some hiccups on - they and quarter terms third quarter, an just MB credit I’m sure but have much loss in a time think

Frank Forrest

is of as we due what is separate did performance. diligence you the did. can This know. confident from we can’t We is that They and a on in remain we company we comment I What us. on you that see Frank. their credit tell MB, What extensive operate specific work

Jamie Leonard

more the Saul, not credit nature one to of just Just idiosyncratic by the of does appears event, an isolated rest of which portfolio. the the taint announcement,

Saul Martinez

enough. over XXX, over sequentially. fee corporate I to a sequentially, because could change X% to If from outlook, estimate, X% fair XXX is the XXX that Okay, the growth banking conservative that’s alone,

You do $XX with believe, have I me I’m million the - wrong. TRA, if correct

but just basis, what’s because underlying us help it You’ll much of a kind I just next equity terms lose not little but lot more something. bit be so understand in of of may through moving maybe surface sort conservative, on it’s missing sifting private guidance gains you of the like perhaps can a parts, a that quarter, seems the line-by-line on

Tayfun Tuzun

gains, some our a fairly some be hope to in do are and so to in No, It’s better a to banking. we that line but has gains difficult forecast fell periodic. There think also private strong in to quarter tends corporate equity general growth bottom quarter I those that were to strong corporate impact. I we’re think would quarter, banking. this Fourth guiding those

the of Achilles mortgage over in some to a seasonality I on it, about obviously we’re we of think growth. banking, also as but weakness We well, cognizant with some year, in fee year X%. we well associated heel general just dynamics; quarter would year respect hope market but over good in there the better, here achieve should with in this basis, overall really fees including feel Continued to is the do based challenges quarter clearly deposit that’s both as areas, but on been market our other

Saul Martinez

in guidance TRA Just $XX of flow the one as well? cash quick million follow-up - the is embedded

Tayfun Tuzun

is, yes. It Correct.

Saul Martinez

you. All right, thank

Operator

of the line comes Matt from Deutsche Your from next question Bank. O’Connor

open. line Your is

Matt O’Connor

the was wondering the talk just morning. use about if Obviously Good you you’re in approaching I quarter. lot could submission share of you cycle. CCAR third through how a buybacks your

done part of plan market, or quite about off capital obviously you back Fed. talked re-submitting bit deal. You and and off in know monetize from a the your the the where I stake year, a try is? big Worldpay, you. from on if don’t back from acquisition to plan a of maybe given incrementally high are since your from Thank there’s you’ve strong stock course again to quite SOX include and I going got that, the this guess of question going well has ask thoughts have submitting then maybe the levels incented and top your which the a to the surprise part still Fed, stock is the possibility you

Tayfun Tuzun

in that, execute Until well our wait will term, which resubmission. the plan, In the buybacks a continue terms CCAR question. clearly to Fed’s for good as as fairly strong have both to is XXXX we raises. of our Matt, itself response by Thanks we plan dividend near to

in agree for market just we company need That in the considering watching to pretty the revenue current execute growth, Worldpay for on look at we as as take get the to plate, over back our in the decision X%, this we and same going stock. own resubmission XXXX executing both from that capital own dynamics. same re-evaluate plan obviously some I we’re successful point Fed be buying little term a so looking are We’ve terms use how we look opportunities us you well Beyond decision, the companies, have the as two We combined etc. growth interesting have at to over to at are past the exit continues factors, our presents the what’s the with period. left remainder underlying to we a of this us Worldpay. our been near the and with then of in integrate

Matt O’Connor

Okay, that’s helpful.

the Just past the something from important update what your on said that of cost basis, so but time, is, slightly us might you’ve ownership think stake zero. I that and exited over remind above just it’s us in to Worldpay what’s going X dollar be the amount in potentially

Jamie Leonard

Worldpay of million. lately, checked million roughly haven’t Matt, unrealized with cost it’s the a $XXX shares million Jamie. We base, XX.X but gain--I about own so it’s roughly $XXX

value, or the so. $XXX around should be million Given

Matt O’Connor

Okay, sorry.

while about over all open important, think you talked down be have to that I guys it’s time. that you’d selling

importance that’s if entirety down over strategic and for we Just opportunity time, revisit to Thanks. the that could the sell financial in versus me. it its

Tayfun Tuzun

small in Yes, company. a value public no a owning strategic of there is percent

just time to find that. right do need to that will we We liquidate the stock,

Greg Carmichael

over you’ve about thoughtful Matt, seen very we’ve as we’ve how very, shares, years. our the been monetized

we’ve equity very said, position public our is to not as hold intent Tayfun been Our this. [indiscernible], that

on opportunities equity our now, at for we’re we options. obviously and that appropriately, where assess that given we’ll could You sense today, some as make right where act think that there’s expect might us there is trading our I

Matt O’Connor

you. Thank

Operator

the comes Morgan line Stanley. of from from Your Zerbe next Ken question

Your is open. line

Ken Zerbe

Thank good morning. you,

other over running Thanks. been is question on what Just runoff? deposits, with obviously banks we’ve to putting strategies try DDA quarters, that number in some you had you’re to of just of the mitigate they’ve about a Could which bearing consistent in minimize talk the the off a place of some seen non-interest or course. of last couple

Jamie Leonard

it’s Jamie. Ken,

The third in little we what quarter different than non-interest bearing was the a performance saw in second deposits quarter.

quarter quarter, - adjusted DDAs the will If second during you highest a been as our in recall believe the DDA quarter. so the that’s third that we’ve in XX% the amount increase I was and a rate down that do rates. commercial driven earnings up runoff DDAs we we be the soft third roughly quarter. just adjusting was and second fourth second in were of earnings by about commercial they X%, commercial by and as increased quarter, XX% the were actually the what beta Then the expect in earning credit rate, well were those the relatively credit the - credit quarter rates stable beta, into we as heading

Tayfun deposits mass and and the and cash and X% and talking - southeast branch consumer continue to the quarter. drive affluent, that To improve DDAs about household to able a do On DDA deposits benefit building our We’ve initiatives commercial the lot management, branch the and are the it’s and that’s efforts the consumer of the We on to fourth by XXXX the like increased just perspective, with going rate you there, by calling then interest promotional both for treasury our acquisition quarter was mentioned. a sequentially, really extent time rebound the and lot I we’ll drivers the side beyond, households that mitigant the so client results the driven along the the a consumer be further that, will to on the growth just expect side. sales. and third DDAs soft offers, up in X%. seasonally we’ve is from there marketing feel see grown seasonal client headwind driven and would side, staffing in just expansion seasonally management we on spent quarter, the down the be driven beyond the soft in are we’re a our consumer on by to fourth new to quarter really ability were side a of see outbound

Ken Zerbe

great. Thank right, All you.

Operator

question JPMorgan. comes the of next from from line Your Vivek Juneja

line Your is open.

Vivek Juneja

questions. of couple A Hi.

color quarter, Firstly was down done versus just your it on the that? expense quarter on any side, headcount this - has non-interest second how

Greg Carmichael

from [indiscernible]. down approximately quarter over was It third second quarter, X%

Vivek Juneja

accrual, the any in how much Was what incentive and there reversal was it? comp or just this quarter was reduction? Okay,

Tayfun Tuzun

and of plans, directly tied been levels, and is there’s comp that. revenue activity just Incentive to one clearly to levels no them change

comp, In on at to basis. we terms quarterly variable look a it of continue

the full are would the year year, I total year overall accrual performance up For I payout, changes on as one variable quarters the three to on year, this going then we headcount to last of of just say to quarter and in relative for activity. that expect both for our the quarters three based first us as well up from the compared the be well. first we of comp to and to another, are be last based year, as up

Vivek Juneja

Okay, that. on great. Thanks

their commercial relationship, Going on charge-off the XX one was charge-off the back to that rate basis was incurred points. MBFI,

When announced a loss to the episodic charge-off rate you is XX those this surprise, one deal. of commercial that you are at that of because so planned you cause high part look a loan they about this was XX came fairly a You that is were. transaction, that have this had rates a the X.X%, obviously going the when where from take rate when closed charge-off assumed loans if upfront on implies couple mark X% the only talked you when don’t you where least at a of CRE is bad, or it C&I, loans but given losses. for you was had--or C&I C&I, this you those mark or Was

Tayfun Tuzun

to I that that they don’t have to a I yet. agreed. Frank’s think and mean, necessarily have are just we statement, access still Yes, again--I’ll company information go back the they separate

we announced quarter will when discussed not take and we thus we going we’re this one the is loan our this not that the point to charge when that transaction. they at not charge off transaction, necessarily At impact we a updating expected that number. point, close mark the of is move to the terms this mark mark what In

Vivek Juneja

thanks. Okay,

Operator

line Partners. Your next question from of comes from Christopher the FIG Marinac

open. Your is line

Christopher Marinac

Thanks, things good earlier investment the morning. I may additional the loss is on that it future? piece in can on final of Sky, minor that Green occur have the The there are remarks. or the missed

Tayfun Tuzun

the No, we as million million quarter. is you the about public working there during remember quarter. the Chris, and shares of then own we invested impact second this price X.X $XX and went Green when obviously their in Sky, started they We share with

Christopher Marinac

Got you.

Your grow. with have to the them? relationship them with approximate balance What’s continues that you

Tayfun Tuzun

billion a little quarter dollars a of It’s as over end.

Christopher Marinac

Tayfun. Okay, Thank very you, well.

Tayfun Tuzun

welcome. You’re

Sameer Gokhale

you any interest if your I further Okay, think don’t in you all Third thank for have questions, Fifth Bank.

you. please and we contact department any happy Investor will Relations have If be you follow-up questions, to assist the

Operator

call. conference today’s This concludes

disconnect. now may You

Fifth Third Bancorp (FITB) 23 Oct 182018 Q3 Earnings call transcript